CFPB ramps up supervision of medical debt collectors

By Stephanie K. Mann, J.D.

The Consumer Financial Protection Bureau has released a report that found medical debt has a significant impact on consumer credit, as 43 million Americans have overdue medical debt on their credit reports. The CFPB is concerned that the systems for incurring, collecting, and reporting medical debt can create difficult challenges for consumers. To better address these challenges, the CFPB is announcing that the major consumer reporting agencies will be required to provide regular accuracy reports to the bureau on how disputes from consumers are being handled.

“It’s hard for consumers to navigate the medical debt maze and come out with a clean credit report on the other side,” said CFPB Director Richard Cordray. “The CFPB is taking action to improve credit report accuracy. Getting medical care should not make your credit report sick.”

Report. The CFPB report draws on sources such as information from credit reporting companies, consumer complaints to the bureau, and interviews with debt collection agencies, healthcare providers, and observers of healthcare billing and payment processes. The findings listed in the report include:

Half of all overdue debt on credit reports is from medical debt—52 percent of all debt on credit reports is from medical expenses.

One out of five credit reports contains overdue medical debt.

15 million consumers have only medical debt on their credit reports—7 percent of all consumers have medical debt and no other collection items on their reports.

Average reported medical debt is $579: the average unpaid, non-medical collections item on a credit report is $1,000; the median is $366. Unpaid medical collections are smaller, with an average of $579 and a median of $207.

Consumer challenges. In a CFPB blog post, lack of accountability and standards for collections practices were cited as a major source of medical debt collection issues. According to complaints to the CFPB, consumers may not be aware that they owe a medical debt or have time to resolve it, before a collection account appears on their credit report. The absence of any standard of how delinquent a medical debt has to be before it appears on a credit report means this can happen anywhere between 30–180 days past the billing date.

In addition, consumers are often confused by multiple bills, providers, and collectors. A single treatment at a hospital can result in multiple bills from multiple providers. For example, after a surgery, a consumer can receive a bill from the surgeon, the anesthesiologist, and the surgery facility. A health insurance policy may cover some providers and some procedures, but not others. And it may cover all or part of a bill. Some consumers may find it difficult to know what they owe, to whom or for what.

New reporting requirements. In Cordray’s opening remarks at the medical debt collection hearing on Dec. 11, 2014, he presented new a CFPB action to hold medical debt collection companies accountable. “We will now require the largest credit reporting companies to provide us with regular, standardized accuracy reports as part of our ongoing examinations about key risk areas for consumers,” said Cordray. “We posted the template for these regular reports today on our website. Most notably, these reports will specify the number of times consumers dispute information on their credit reports during that period.” The report, emphasized Cordray, will also list furnishers with the most disputes, industries with the most disputes, and furnishers with particularly high dispute rates relative to their peers.

Consumer advisory. In order to help consumers keep medical debt in check, the CFPB has issued a consumer advisory with seven important steps to follow: